Distributors transition to subscription-based membership

Industry

Published: 14 Mar. 2023, 10:16

Distributors transition to subscription-based membership

Big box chain Emart Traders promotes its paid membership system at its branch in Nowon District, northern Seoul on Oct. 4, 2022. [NEWS1]

Distributors are updating their policies on membership, switching to subscription-based models that compensate for higher barriers to entry by providing more coupons and reward points to members.

Through the change, distributors hope to lock in members and boost profits as the Covid-19 pandemic nears an end.

Shinsegae plans to release in July an integrated membership service that ties together all its subsidiaries, including Emart, Shinsegae Department Store, Starbucks and Shinsegae Duty Free.

The service will expand the number of brands and benefits available, likely under a paid subscription-based membership model.

The company is holding an inhouse contest to name the new service.

Shinsegae previously launched last May its "Smile Club" service that integrated e-commerce platforms SSG.com and GMarket.

Gmarket's 3 million members can now receive the same benefits on SSG.com as well, including free shipping, discounts and reward points.

Smile Club member pay a 30,000 won ($22.63) yearly fee.

Instead of integrating online and offline distribution channels, some companies are focusing on strengthening one or the other.

Lotte Mart launched a new point system dubbed “Snow Point” from this year. The photo above shows models promoting the new system. [LOTTE MART]

Lotte Mart, for instance, is running a new reward point system dubbed “Snow Point” from this year.

The service provides more discounts and promotions to customers who frequently visit their offline stores.

The new point system ranks subscribers based on their accumulated purchases over the previous six months, with members accumulating points faster the more they purchase.

"Snow Point" surpassed 2 million members just two months after its launch.

Homeplus operates a membership system based on consumers’ tastes, highlighted by its special membership “Juju Club” for alcohol lovers.

"Juju Club" targets customers who visit offline stores to purchase booze, offering them exclusive coupons or accelerating their reward point rate.

Other membership programs like the Meat Club and My Pet Club welcome consumers based on their interests.

Yearly membership fees aren't cheap, but consumers have been responding positively nonetheless, especially when they receive benefits worth the expense.

Shilla Duty Free began its paid membership service “Shilla&” last July.

Though the membership fee is a whopping 300,000 won, the service offers presents and 390,000 won in reward points to use at the company's duty-free stores.

It took just two days for the exclusive, 200-member program to fill up.

Last month, the duty-free operator collaborated with Amore Pacific to start a paid membership program that nearly sold out with members receiving 1 million won in benefits for an 800,000 won subscription fee.

Homeplus attracts consumers through interest-based memberships. The photo above shows models promoting the membership titled “Juju Club” which gives benefits for customers which buy alcohols offline. [NEWS1]

The recent trend in the distribution industry is paid or special types of memberships.

The companies attach yearly membership fees or raise the purchasing threshold to become members, but instead provide more coupons and benefits.

This takes advantage of consumer psychology, with members focusing their spending on one platform so that they can maximize their benefits.

E-commerce operators have already demonstrated the benefits of membership.

Coupang provides free fast shipping and returns based on its WOW membership, with members initially paying 2,990 won per month.

Despite raising the fee to 4,990 won last June, Coupon retained an industry-leading 11 million WOW subscribers, with the membership fee hike credited with helping Coupon go into the black in the third quarter of last year.

Psychological resistance against paid membership is weakening as well. Companies are opting for paid membership programs as consumers positively respond to even small-scale promotions in the face of high inflation.

From the perspective of companies, paid memberships provide a stable source of income.

Membership fees reportedly account for more than 70 percent of the yearly operating profit of big box chain Costco.

Experts say that companies want to attract loyal customers as competition between distributors grows fiercer and companies sense limits to how far they can distinguish themselves in terms of price or services.

“Including online channels, the domestic distribution market has already reached its maturity and companies have reached the stage where they must boost profitability rather than external growth,” said Dankook University business administration professor Jung Yeon-sung.

“Ultimately, companies will likely use attractive membership programs as an important tool.”

BY YOO JI-YOEN [lee.jaelim@joongang.co.kr]